Stax spells out 3 priorities for export-led manufacturers

Following the Covid-19 pandemic the supply chain focus of global markets has shifted. Historically, there were four primary factors that were considered in developing the sourcing supply chain—cost, quality, quantity (bulk) and reliability. Now companies are increasingly looking at three additional factors: geographic diversification/profiling, traceability (visibility), and a combination of bespoke and bulk.

On the back of this global supply chain shifts, Stax has explored these priorities for export-led manufacturers in Sri Lanka, as detailed below.

According to the World Economic Forum, by 2030, 60% of new economic growth and 90% of the 2.4 billion new additions to the middle class will come from Asia. In a bid to support local manufacturing and build supply chain resilience, North American and European governments will incentivize on-shoring and near-shoring to bring supply chains closer to home. While these markets will continue to be large part of our export basket in the near-term, Sri-Lankan businesses must focus on building relationships with leading Asian brands and companies to diversify our export revenue base. Tourism did a similar shift more than a decade ago when we reduced our reliance on the European markets and enticed travellers closer to home from India and China.

Following the global supply shocks at the beginning of the year, firms are reorganizing operations with resilience at the core. Everything from capacity planning and inventory management to supply logistics and production methods are being reevaluated to ensure businesses can withstand shocks, even if short-term efficiency may have to be sacrificed. Traceability is key in building resilience, with companies extending their scrutiny beyond their primary suppliers into Tier-2 and Tier-3 suppliers.

On the back of geo-political tensions and manufacturing diversification measures, global producers have been leaving China, with the U.S, India and Japan announcing schemes incentivizing this shift. Main rationale for supply destination selection are production costs (labor and energy), trade relations and proximity to demand markets. Though Vietnam has disproportionately attracted investor interest, Sri Lankan manufacturers should proactively target buyers seeking to diversify their supply chains beyond China.

Stax Inc. is Sri Lanka’s leading management consulting firm, headquartered in Boston and offices in Chicago, New York, and Colombo. With more than 25 years of experience, Stax advises the world’s largest public and private corporations, private equity firms and their portfolio companies across a broad range of industries covering 40+ international markets. With a growing client base in Sri Lanka, including diversified conglomerates, blue-chip industry leaders, large family businesses, government organizations, and NGOs, Stax inspires organizations to dream big, think outside the box, and complement gut-based decision-making with fact-based research. For more information, please visit www.stax.com.